GOP and DEMS Vote to Strengthen "Bell Monopolies"

Yesterday, Feb. 27th, 156 GOP House Members joined 117 Dems to pass (273-157) H.R. 1542, the deceptively misnamed, "Internet Freedom and Broadband Deployment Act".

The GOP has changed dramatically since the House Class of '94, when an "entrepreneurial" philosophy and "fresh approach" stood at the forefront of these new soldiers of the "Republican Revolution". Their ideas and support of "free enterprise", "free-markets", and "competition" gave a breath of fresh air to the stifling scent of "old politics" and back-room deals with "big business" (for which the GOP had come to be identified-with during the pre-Reagan era).

Now, the GOP Leadership and "power-brokers" are back in the pockets of "big business" through their support and passage of H.R. 1542, to the detriment of consumers and entrepreneurial companies, and in support of 4 regional local phone monopolies.

Since the 1984 breakup of the AT&T monopoly, what was once seven Bell companies and GTE has been reduced by merger to four behemoths - Verizon, SBC Communications, Bell South and Qwest. These companies control in excess of 90 percent of the telephone wires for our nation's homes and businesses. The GOP has now seen that these 4 monopolies will be protected by even more legislation.

This issue does not boil down to strictly "political" affiliation (as you can see that majority of Dems and Repubs voted arm-in-arm on this - while at the same time, a similar political makeup was taken in opposition to this Bill).

However, I look and expect for the GOP to protect and support the "entrepreneurial philosophy" that helped them garner a "majority" in the 'people's house' in '94. I provide below, an article from "Roll Call", describing what impact H.R. 1542 will have on our telecommunications business:

Competition Creates Innovation, Low Prices Should Congress pass the Tauzin-Dingell Internet Freedon and Broadband Deployment Act?

Today we are at a crossroads in our telecommunications policy. We can move forward with more competition, lower prices and greater innovation, or we can enact measures like the Tauzin-Dingell bill (H.R. 1542), which increase monopoly control over broadband, result in higher prices and worse service, and which will make high-speed Internet service inaccessible to most Americans.

How did we get here? Thanks to the Department of Justice and upstarts like MCI, in 1982 the court split up Ma Bell, and we finally had competition in phone manufacturing and long-distance service.

AT&T's market share plunged, prices dropped, and new companies and innovation flourished. It's as basic as economics 101: Competition leads to lower prices, better service and greater innovation.

But our work was not done. In the 1996 Telecommunications Act, on a bipartisan basis, Congress struck a deal with the Bells. The Bells would be freed from government regulation of a monopoly infrastructure the government had nurtured, and in exchange they would share their monopoly networks with competitors. As a result of this trade-off, we were finally able to take the next step and introduce real and viable competition into the local loop.

Believing in the promise of the 1996 act, competitors invested 10s of billions of dollars, created 100,000 jobs and began the enormously difficult task of providing choice to consumers and businesses. The lesson is, while large companies tend to seek monopolies and eventually stagnate, new companies innovate and create jobs.

Unfortunately, we are at risk of backsliding into a monopolistic morass. What was once seven Bell companies and GTE has been reduced by merger to four behemoths - Verizon, SBC Communications, Bell South and Qwest. These companies control in excess of 90 percent of the telephone wires for our nation's homes and businesses. While innovation has flourished and prices have been slashed in the area of long distance, the reverse has occurred in the local network.

At this critical juncture, when the local telephone networks are being used as the essential facility to launch DSL broadband service, there are some who want to undo the 1996 act. This would give the Bells a totally unregulated monopoly over local telephone markets; that can then be used to leverage similar monopolistic control over broadband services. This is what happened years ago when Ma Bell used its local control to dominate long-distance service.

The history of DSL deployment demonstrates what happens when the Bell monopolies are protected from competitors. Although DSL technology is not new - it has been around since at least 1990 - Bell deployment did not begin in earnest until 1998.

Why the delay? Prior to that time, the Bells did not want or need to offer products such as DSL. The Bells only began offering the more affordable DSL services when they faced competition from cable modems and companies formed as a result of the 1996 act. This is the same competition the Bells are trying to quash.

The Tauzin-Dingell bill, which the Judiciary Committee reported unfavorably and which was reported by a split Commerce Committee, is a step backward toward remonopolization. The bill would vastly scale back the Bells' obligations to share their lines and facilities with DSL competitors. If this occurs, most of the remaining competitors will go under, taking more than $700 billion of market capitalization with them.

Additionally, Tauzin-Dingell would allow the Bells to offer interLATA "data" services immediately, without demonstrating that their local networks are open to competitors, as the 1996 act requires.

This feature of the bill is so one-sided, it would even allow monopolists with more than 90 percent of the local market to offer long-distance data services without demonstrating that competition has taken root.

The Tauzin-Dingell bill would effectively transfer the monopoly over local telephone service into broadband DSL. By gutting the market-opening, pro-competitive requirements of the 1996 act, Tauzin-Dingell gives the local Bell monopolies a license to exclude.

The last thing we need to do is bring the same high prices, shoddy service and stifling of innovation we have seen in the local telephone market to the high-speed Internet market.

Proponents of Tauzin-Dingell argue that the Bells should be "deregulated" to give them a level playing field with the cable broadband industry. This is a red herring. Cable companies are not deregulated; they are differently regulated. They face local franchising requirements, pay billions of dollars in annual franchise fees, and must provide access to their services without regard to residents' income levels. The Bell companies face none of these requirements.

In addition, the Federal Communications Commission already has the authority to regulate cable companies if they act in an anti-competitive manner. Finally, the Bell system has a unique history of antitrust abuse, has been sued by the government three times and has been adjudged to be an illegal monopoly, resulting in Ma Bell's breakup. No such legal determinations have been made about the cable industry.

Supporters of Tauzin-Dingell also state that it is technically not feasible for the Bells to share their upgraded fiber-loop facilities with competitors, a practice known as "line sharing." This is also false. There are no technical limitations that prevent competitors from accessing upgraded fiber facilities.

Competitors can access fiber networks by interconnecting their equipment with the Bells' facilities in the central office where the fiber loops terminate and at "remote terminals" where the old copper lines meet up with the fiber.

We think there is a better way to spur broadband deployment that does not permit the local phone system to devolve into a monopoly and that, instead, creates competition for broadband services. First, we should maintain an active role for the Department of Justice to police the telecommunications industry and enforce the market-opening provisions of the 1996 act.

The Justice Department is the agency primarily responsible for antitrust enforcement, and its role in the 1984 AT&T antitrust consent decree has given it decades of expertise in telecommunications issues. It is critical that the department maintain a role in order to preserve a healthy and competitive industry.

Second, the FCC and state public-utility commissions must use their authority to enforce the pro-competitive requirements of the 1996 act, such as the unbundling and line-sharing provisions of Section 251 and the 14-point checklist in Section 271. The FCC and state commissions should require the Bell companies to live up to their end of the bargain.

Third, we must preserve the ability of private parties to bring their own antitrust actions when monopolistic and exclusionary conduct occurs. The antitrust laws do not favor one group over another, but are designed to allow for the application of objective criteria that encourage competition for the benefit of all consumers.

Congress explicitly preserved these antitrust principles in the 1996 act, and we should reaffirm their application in the area of telecommunications.

We intend to do everything we can to see that an industry born in monopoly in the 20th century is not reborn into monopoly in the 21st century. We don't need to do special favors for monopolies. We need more competition, more innovation and lower consumer prices.

Rep. John Conyers (D-Mich.) is the ranking member on the Judiciary Committee. Rep. Chris Cannon (R-Utah) is a member of the Judiciary Committee.

Yes, that is what is usually pointed to as a justification for eminent domain, and therefore for government. I think that the example with the recalcitrant property owner that wouldn't sell to a road builder is fanciful. The reality is that the market easily bypasses the stinker:

1. The road builder would be foolish to start until he has all the lots under contract. He would secure more contract options than he will end up executing. For example, if I my road could go though either A, B, or C, I will try to take an option with all three, but make the final decision when the available options along the entire route are known to me. Thus no individual lot owner is in the position to wreck the project (unless we have a lot that stretches from Louisiana to Minnesota, which is fanciful)

2. The lot owner who is willing to sell in principle would be in competition with his neighbors who also wish to sell. Thus the price of his lot has a natural competitively-defined cap.

3. The lot owner who doesn't want to sell will be bypassed.

Interesting points about roads, and perhaps some day private roads will predominate.

Until then, we have the current situation with most roads owned by government and most phone and cable lines strung along government land. and the phone and cable companies in a non-market monopoly position. I don't object to the government intervening on behalf of competition in this case, while expecting constant corruption always needing "good government" reforms.

We agree then.

This is another case to complement #10. A lucky property owner can be in a sole position to hold up the road building enterprise, as for example, in the case of a property owner on an isthmus. If he refuses to sell and it can be shown that the high price offered would compel any reasonable owner to sell, then I believe that a case of wilful disruption of the rights of his neighbors to trade could be proven in courts, still obviating the need for eminent domain. If he simply uses his position to obtain the highest possible price the road builder would be willing to pay, that should be his right, -- and eminent domain tends to violate that right. If the highest price offered is not objectively enough to justify his trouble, and so he doesn't sell, then we conclude that the need for the road did not surpass his needs, and again no violation of rights occurs.

I am somewhat troubled by the necessity to involve an objective yardstick of a "reasonable person" in order to properly judge this; but at any rate the mythical inevitability of eminent domain laws remains disproven.

Consider the following law:

When a single property holder blocks the construction which by its nature cannot be located elsewhere;
When the builder had made an offer that would substantially improve the condition of the owner in comparison to the value he or his estate could reasonably derive from the property without selling it;
Then the court may force to auction off the property with the starting bid being the above mentioned offer.

I believe, it is far superior legislation to eminent domain, because it only applies to properties that block construction in a monopoly fashion and owners who demonstrate unreasonable recalcitrance; when it is applied, the unique character of the property and its subjective value to the seller are reflected in its price. It takes care of the truly unjust case of blocking, when a stubborn potato farmer would prevent a valuable improvement to the infrastructure simply because he only understands potatoes and wouldn't move to a better field a few miles away from the isthmus. The state here acts on the best interest of the property owner, after it's proven that he is incapable of a rational decision, as opposed to its own interest.

Ugh! Now we have the State deciding that someone doesn't have rationality because they don't agree with the herd on the highest and best use of their land. We've gone a long way from the libertarian the enabling rule of non-initiation of force here. Someone can believe that the highest and best use for them lies in preserving their land as a potato farm, a nature preserve, or whatever, and his neighbors decide that he lacks rational capacity, intervening as "guardians" through the State!

No, unless we carve out an exception to land ownership, perhaps based on Georgist or Lockean principles, I think we have, with your proposal, a pretty clear violation of the whole libertarian approach to property.

I believe that the non-initiation of force is a very poor way to describe natural rights in general. For example, it tells us nothing about conditions of ongoing conflict, or about criminal inaction. Without getting too theoretical, note that libertarianism does not object to the state acting on behalf of the mentally incapable when there is no private guardian. Such is the case in which my law operates.

Besides, libertarian or not, the point of my law is to demonstrate the lack of need for eminent domain laws in a legal system that seeks common good. A pure libertarian system (based on the narrow interpretation of non-initiation of force) doesn't seek public good at all and would view a blocked isthmus as something the society should be concerned about.

In your isthmus case, we don't have an ongoing conflict where we can't recall who threw the first punch - the neighbors did via state intervention, a new form of eminent domain in your interesting proposal, but one perhaps even more vulnerable to corruption than current law.

I'd reverse that if I instead viewed rights in land as special and less than absolute, where all citizens in a jurisdiction had partial claims upon each other's land for certain narrow purposes (roads, sewers, etc.) of broad impact. Then the holdout trespassed upon the property rights of other the other citizens, and they justly call for government intervention in defense against his initiation of force.

I don't equate the refusal to sell something at a "reasonable price", or any price, with criminal inaction. I don't have a right to your property, or even the temporary use of your property, even if I want it intensely, except in some immediate life or death cases, and probably not even then. But I don't see how your isthmus case meets that stringent requirement.

Assuming for this discussion that I want the state to intervene as guardian on behalf of mentally incompetent adults, I'd want a separate hearing to establish true disability, and not one presumed proven by the mere refusal to sell a land parcel. I'll bet the potato farmer/isthmus holder would easily pass that test.

A pure libertarian system (based on the narrow interpretation of non-initiation of force) doesn't seek public good at all and would view a blocked isthmus as something the society should be concerned about.

I don't know if you meant to say "... shouldn't be concerned about."

As to a pure libertarian system not seeking the public good, of course I agree, but then no system does - only individuals do! Seriously though, some see a libertarian system of maximum individual liberty, with the enabling rule of non-initiation of force, as best promoting the general welfare.

I was offering examples of why non-initiation of violence is a shaky foundation. Ongoing conflict is not related to our blocked isthmus. Unjust inaction is somewhat related, as the following paragraph would show. Sorry for not making that clearer.

State as guardian of mentally incompetent is a good analogy, but it is not what we precisely have under my law. The state doesn't have to determine that the potato farmer is a medically mental case. The state has to determine that his refusal to sell is driven by a desire to harm the builder or the neighbors, and not by a desire to derive a better value out of his property. That can be a very tough test for the government to prove indeed.

The comparison between my law and eminent domain is stark. Under eminent domain the state simply disregards the rights of the owner; it doesn't set up a competitive system of determining the changing market price of property; it picks cases where eminent domain is exercised based on its own priorities and not on the ability of the builder to pay for the properties. My system is rooted in property rights and case-by-case resolution through courts. It removes the decision-making from the government and therefore eliminates corruption.

you meant to say "... shouldn't be concerned about."

Yes, thanks.

I see, as others have, a big problem with broadening the concept of actionable harm beyond the narrow libertarian limits of physical violence, theft, and fraud. Every action that every human makes or doesn't make,without exception, has a negative impact on someone. Your proposal would open the door to lawsuits without end.

I have a further problem with agonizing over the motive of the isthmus holder. Either he causes harm or he doesn't, and the courts should intervene or not in relief of the neighbors.

Whenever you remove a power, such as eminent domain, from the government and let the individual players sort it out, you "open the door to lawsuits without end". There are no lawsuits in a dictatorship.

The motive of an economic player is recognized to be significant in law. For example, if a business pollutes the environment because it can't help it, that situation is treated differently from a situation when one poisons the environment with a malicious intent.

Further, the harm that our potato farmer causes is concrete, it is a loss of opportunity for the traders who would use the road. Loss of opportunity is recognized in common law as well.

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